Using DMA CFDs in your Trading Plan

Direct Market Access or DMA is the term often used to explain a kind of CFD which has become popular within the Australian market, these are often known as DMA CFDs. With DMA CFDs your trade is passed directly through to the underlying equity market with no dealer or market maker involvement, which means orders are executed at the true market price and in a timely manner without re-quotes. Trading DMA CFDs is very similar to buying and selling shares on the internet.

DMA CFDs provide absolute order transparency. Traders are able to participate in the market depth of the underlying share over which the CFD is quoted by joining a bid or offer queue and also the open and closing auction phases of the market. DMA CFDs provide all the benefits of buying and selling shares with the additional leverage that CFDs offer.

Trading DMA CFDs is extremely similar to trading shares, traders are able to hit the bid or offer or join the buy or sell queue. DMA CFD traders have significant benefits over traders using market made CFDs for the reason that they’ve got the potential to enter and exit trades at superior prices.

When trading DMA CFDs you will be required to subscribe to exchange data, the price of data varies from exchange to exchange. Once subscribed you’ll have access to real time rates and market depth allowing you to view the number of buyers and sellers at each different price level and participate in order queues allowing partial fills and improved execution.

One shortcoming of DMA CFDs is that guaranteed stop loss orders are not offered, however these are not always necessary as typically DMA CFDs traders use options to manage their downside risk however these are often overly complicated for the novice trader.

When trading DMA CFDs traders have the ability to be price makers meaning that as soon as an order is placed it’s always transmitted to the actual market and can have an effect on the price of the stock on which the CFD is based.

Buying and selling Contracts for difference using a Direct Market Access (DMA) model is best suited for frequent traders that trade on an intra day basis. Frequent traders will find that DMA CFDs will allow them to buy and sell freely without dealer intervention and obtain better prices when buying and selling. DMA CFDs are suited to active day customers and scalpers who are looking to profit from small price changes quickly.

There are a variety of Contract for difference platforms that you can trade DMA stock CFDs on, the two most common platforms in Australia are webIRESS and ProDeal. Both platforms allow traders to take part in the market depth of the DMA CFD on which they are trading. The webIRESS platform is also extremely popular within the share trading community, largely because of the variety of order varieties on offer, whereas ProDeal is very common amongst CFD traders, this is because of the broad range of CFDs on offer and its sophisticated charting functionality.

It is imperative to note that prior to starting to trade DMA CFDs you consider whether this sort of CFD fits your trading style, choosing the incorrect CFD variety will affect the success of your trading plan.